), a leading fashion accessories distributor, to beat
expectations when it reports fourth quarter 2012 results on Feb
Why a Likely Positive Surprise?
Our proven model shows that Fossil is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP
: Fossil's Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) stands at +0.44%. This represents the difference between the
Most Accurate estimate and the Zacks Consensus Estimate. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for shares.
Zacks Rank #3 (Hold)
: Fossil currently carries a Zacks Rank #3 (Hold). Note that
stocks with Zacks Ranks #1, #2 and #3 have a significantly higher
chance of beating earnings. The sell rated stocks (#4 and #5)
should never be considered going into an earnings
The combination of the stock's Zacks Rank #3 (Hold) and ESP of
+0.44% makes us confident of an earnings beat on Feb 12.
What is Driving the Better Than Expected Earnings?
Fossil's acquisition strategy, its strong liquidity position,
prudent expense management and its ability to generate positive
comparable store sales are the growth drivers of the stock.
The acquisition of the Skagen brand in last April has been
adding strength across the North American watch business and also
resulted in significant improvement in the Asia-Pacific wholesale
business in the third quarter. Also, Fossil has been delivering
back-to-back increases in comparable store sales, which has
fueled growth. Further, its Jan 2013 acquisition of the Latin
American distribution rights from Florida-based Bentrani Watches,
LLC will further expand its exposure in Latin America, which is
now the fastest growing region in the world.
The company's healthy third quarter results and its growth
strategies thus raised its earnings per share projection for
full-year 2012 to $5.42-$5.45 from $5.29-$5.34.
Fossil has beaten estimates in all the past four quarters,
posting a healthy average earnings surprise of 11.4%. Estimates
are mostly seeing an upward trend ahead of the fourth quarter
Other Stocks to Consider
Fossil is not the only firm looking up this earnings season.
You can also consider these stocks that offer exposure to the
attractive consumer discretionary sector:
), Earnings ESP of +5.00% and Zacks Rank #2 (Buy)
), Earnings ESP of +2.94% and Zacks Rank #2 (Buy)
), Earnings ESP of +0.67% and Zacks Rank #3 (Hold)
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